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Idle Capital and Long-Run Productivity


  • Dalgaard Carl-Johan

    () (University of Copenhagen and EPRU)


This paper examines the joint determination of long-run income per worker and capital utilization. Comparatively low (optimal) rates of capital utilization may arise in poor economies in response to weak underlying structural characteristics. The quantitative implications of variable capital utilization are also explored. It is demonstrated that adding endogenous capital utilization to the Solow model implies a rate of convergence in line with empirical estimates and that controlling for capital utilization has important consequences for the results stemming from cross-country growth and levels accounting.

Suggested Citation

  • Dalgaard Carl-Johan, 2003. "Idle Capital and Long-Run Productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-44, July.
  • Handle: RePEc:bpj:bejmac:v:contributions.3:y:2003:i:1:n:6

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    References listed on IDEAS

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    Cited by:

    1. Diego Romero-Avila & DIEGO ROMERO-ÁVILA & ILASKI BARAÑANO, 2012. "Long-Term Growth and Persistence with Endogenous Depreciation: Theory and Evidence," EcoMod2012 3757, EcoMod.
    2. Martial Dupaigne, 2007. "Les variations choisies de l'utilisation du capital : une revue des implications macroéconomiques," Revue d'économie politique, Dalloz, vol. 117(2), pages 161-196.
    3. Chatterjee, Santanu, 2005. "Capital utilization, economic growth and convergence," Journal of Economic Dynamics and Control, Elsevier, vol. 29(12), pages 2093-2124, December.
    4. Monteiro, Goncalo & Cook, Adam & Dey, Sanjoy, 2013. "Optimal tax policy under habit formation and capital utilization," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 230-248.
    5. Groth, Christian & Wendner, Ronald, 2014. "Embodied learning by investing and speed of convergence," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 245-269.
    6. Dalgaard, Carl-Johan & Winther Hansen, Jes, 2005. "Capital utilization and the foundations of club convergence," Economics Letters, Elsevier, vol. 87(2), pages 145-152, May.
    7. Chatterjee, Santanu & Mahbub Morshed, A.K.M., 2011. "Infrastructure provision and macroeconomic performance," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1288-1306, August.
    8. Kevin x.d. Huang & Qinglai Meng & Jianpo Xue, 2017. "Balanced-budget rules and aggregate instability: The role of endogenous capital utilization," Vanderbilt University Department of Economics Working Papers 17-00005, Vanderbilt University Department of Economics.
    9. Chatterjee, Santanu & Mahbub Morshed, A.K.M., 2011. "Reprint to: Infrastructure provision and macroeconomic performance," Journal of Economic Dynamics and Control, Elsevier, vol. 35(9), pages 1405-1423, September.

    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence


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